Amazon vs. Big Publishing: 800 lbs vs. 798 lbs.


Last week’s issue of Bloomberg’s Businessweek included an article titled Amazon’s Hitman. If you haven’t read it, you should. It is enlightening.

The gist of the article is that Amazon is gearing up to challenge the publishing world on its own turf: the signing of and creation of big-name authors who sell hundreds of thousands, if not millions, of books. And this assault worries the Big 6 publishers — Hachette, Macmillan, Simon & Schuster, Penguin, Random House, and Harper-Collins – with good reason: Amazon has more market value and disposable cash than they do combined.

The article discusses the history of the relationship between the Amazon and the publishers, along with what Businessweek thinks is Amazon’s thinking. But with all of their crying the blues, the Big 6 currently are in the driver’s seat; all they have to do is be willing to drive.

There is no reason why the Big 6 can’t offer exclusive deals to Kobo and B&N. Give them a 3-month exclusive selling period for expected ebook best-sellers and do away with the agency pricing during that period. After 3 months, make the ebooks available to everyone and reinstate agency pricing. This would boost competition and play against Amazon’s exclusivity program.

I suspect that this scenario won’t occur because the Big 6 simply do not have the spine. I don’t see any antitrust violation — if Amazon can do it each of the Big 6 can do it, too — but even if there were a possibility of antitrust violation, do it anyway and keep the program going while you hash out with the government the antitrust issues. That hashing out could take years, which would give Amazon’s competitors an opportunity to become real competitors. More importantly, it might well be an effective weapon in the crusade to keep competition in publishing alive.

Instead of wringing their hands and acting as if there is little to nothing they can do, publishers need to creatively fight Amazon’s onslaught while they are in a position to do so. Right now Amazon has no Stephen King-level authors in its stable. Amazon still needs the resources of the Big 6 to fill out its ebookstore. Remember that it was Amazon that caved in the dispute with Macmillan and brought agency pricing to ebooks. But the day isn’t far off when the advantage will shift to Amazon and the Big 6 will be able to spend their days writing their own obituaries.

The difference between Amazon and the publishers is that Amazon is willing to continue to lose money on its book operations for as long as it takes to control the field, relying on its other business to shore up its balance sheet. In contrast, the Big 6 are unwilling to lose money even for one day, even if it means their ultimate survival. Jeff Bezos is capable of thinking years ahead, like a great chess player who can think dozens of moves ahead; in contrast, the Big 6 CEOs are like the starting chess player, unable to think strategically even one move ahead, let alone several. Bezos has the spine to tell shareholders no payout this quarter or next; the Big 6 CEOs do not.

Yet the Big 6 have an opportunity to shakeup the ebook market and turn it, at least temporarily, until Bezos’ next countermove, in their favor while simultaneously shoring up Amazon’s biggest competitors, Barnes & Noble and Kobo.

Right now exclusivity is working a one-way street. Although the Big 6 declined to participate in Amazon’s current experiment, it is worth noting that Bezos had no compunction about asking them to do so. If the Big 6 won’t offer exclusivity to B&N and Kobo, perhaps B&N and Kobo should approach the Big 6. This is the one area in which Amazon is vulnerable. It is one thing to have exclusive rights to a self-published author’s books, but quite another to have them to a Stephen King’s writings.

The ball is now in the court of the Big 6. What will they do to counter Amazon? If I were a gambler, I’d say the odds were that all they will do is complain but do nothing substantive. There wasn’t much at stake in the agency pricing showdown on either side. An exclusivity arrangement with B&N and Kobo, however, puts a lot at stake. It will be interesting to see how this plays out.

(Via An American Editor.)

15 Comments on Amazon vs. Big Publishing: 800 lbs vs. 798 lbs.

  1. Amazon accounts for a huge amount more ebook sales than the Kobo store or B&N. I agree it would be a good solution, and something needs to be done, but excluding Amazon for launch of titles is unrealistic at this point.

  2. “wringing their hands and acting as if there is little to nothing they can do”

    In my opinion, this is the problem with the Big 6 (and many other publishers) in general. They’re still wringing their hands over the creation of e-books!

  3. Giving B&N or Kobo exclusive rights for the first three months of publication before offering the book to Amazon on month four wouldn’t make any difference in my book buying.

    I can’t see myself buying a second e-reader just so I can have a book on the first day of availability. First, how many books would be on my “must have” list? Looking at my buying habits, there are only six or seven authors whose books I always buy. The chances of all of them offering books at the same time is small, so maybe one or two books are offered exclusively at B&N or Kobo during the same month. Is that enough to convince me I need another e-reader? Nope.

    Also…if I have books on two different e-readers, I’m faced with carrying two e-readers when I travel, along with two chargers, two cases. At home I’d have to keep track of two readers…are they both charged? which reader has the book I’m reading on it? what if I want to look at another book? is it on “this” reader or the one in the other room?

    Maybe that’s overstating, but I’m in love with the ease of having everything I need on one device, in one place whenever I want it.

    I can easily wait a few months for a new title. I’m sure Amazon will have lots of other books to choose from in the meantime.

  4. Windowing has been proven not to achieve anything except reduce sales.
    If the BPHs want to deny Amazon content they have to completely boycott them, not just give the opposition timed exclusives.
    And that requires outright guts.
    Don’t expect to see it.

  5. They’ve already tried playing a big distributor against Amazon. That would be Apple, and it brought us agency pricing. Agency price was the magic bullet that was supposed to level the playing field, save the world, and preserve literature for generations to come. Or something. At this point, I don’t particularly care whether the “Big 6” make it or not. Actually, I take that back. I kinda hope one or more of them crumble and the imprints within that company each go their own way. It would bring editorial diversity and offer new freedom to recreate their business processes (such as book accounting) for the 21st century.

  6. If the publishers were to try something like this, all the readers who like buying from Amazon would rise up in anger. Look at the kerfuffle that surrounded agency pricing, with scads of one-star reviews for agency-priced books.

    The biggest part of the problem, from the publishers’ point of view, is not so much that Amazon is doing these things—it’s that Amazon is doing these things and the consumers like them. If they try to do anything to smack Amazon down, Amazon will introduce them to its little friends.

  7. It all sounds to me like someone having a tantrum and taking their ball home. This is business. The only one who seems to consider the customer here is Amazon. Every other party to this seems only interested in keeping the ‘enemy’ out.

    I’m sure it will end eventually with some companies thriving and others dying out. I think you’ve hit the key point with the comment on short term v long term thinking. In the long term there is a very profitable industry still waiting to be found by someone other than Amazon. In the short run, infighting is going to kill some traditional businesses.

    I like Amazon, but I don’t want them to have a monopoly – competition is healthy.

  8. This is very good news for readers and if the big six adopted this kind of petulant behaviour it will wipe them off the map of publishing.

    Competition is what we want. The Big 6 have to face up to having their cozy little world upset.

    Next thing we need through is competition in the online world.

  9. Amazon aren’t aren’t encouraging competition with their behaviour. They are inherently anti-competitive. They want there to be no competition at all. It’s just like Apple’s iBooks author tool, and like the Kf8 format, designed to lock people into an ecosystem. That’s not competition, that’s a monopoly.

  10. I see no sign Amazon are anti competitive. They are just competitive.

    The Big 6 have had the publishing world to themselves for too long. Amazon is coming into that market. How are they entering it in an anti competitive way ?

    Chrxr – in what way is iBooks Author anti competitive ? They are not stopping anyone else competing. They are not hindering Android or any other tablet or computer software/hardware company from introducing similar products. iBooks Author may be restrictive, and be annoyingly so – but not anti competitive.

    If you want to find anti competitive behaviour then look at the Big 6 publishers. These are the nasties in this game.

  11. Amazon isn’t “anti-competitive” at all. They’ve embraced and understand ebooks & ebook readers in a way that the Big 6 haven’t. Those publishers continue to shoot themselves in the foot as they desperately try to make ebook editions march lockstep with hardcopy editions, charging the same prices for both–and in some cases charging more. Ebooks cost the publishers much less overall–no paper, no printing, no inventory storage, no returns for unsold copies, etc. etc. etc. They’d make a fortune if they’d just realize that they’d sell a lot more if they just charged a bit less. Which is a darn site better than charging more and selling less….

    But, hey, the Big 6 are leaving the way open to independent writers. Many of them are quite good. And they charge a lot less. Same thing goes for established writers who have retained their electronic rights & are re-issuing in ebook editions. More power to them!

  12. This ploy could work if (and only if) they sell .mobi format books DRM-free.

    Kindle owners will not run out to get a Nook, Kobo or other device just to take advantage of limited exclusivity and they generally won’t want to be limited to reading in proprietary apps on their desktops or laptops.

    However, make it easy to buy, download and read on the device they already own and the Big 6 have a decent chance at being successful.

    Bill Smith

  13. I have to say, this is one of the silliest posts I’ve seen lately about the publishing industry. The major publishers can’t just decide not to distribute their authors’s books via Amazon and Kindle. That’s the sure fire way of losing authors and the agents who represent them who fundamentally care largely about sales not the outlet of sales.

    Limiting distribution of content is not the way of preserving the relevance of publishers in the content creation and distribution supply chain–it’s marketing, that is driving discoverability of books. The skill set associated with marketing in the digital age is actually more available to the people who know the content deeply and who is interested and why; that sounds more like publishers not Amazon.

  14. The Big 6 won’t do anything about it for the same reason they didn’t do anything to stop Amazon becoming such a dominatn force in the first place… Money.

    The Publishers want to have their cake and eat it, they can single handedledy halt Amazon’s growth now just like they could have 10 years ago by not caving in to Amazon’s demands.

    If Amazon try to strongarm the publishers into unfavourable pricing deals on contracts then the Publishers DO NOT have to sign those deals. They sign them today for the same reason they signed them 10-15 years ago, because Amazon have pretty much single handedly increased the publishers sales by a huge amount compared to what they were selling before Amazon came along.

    They were too concerned with counting the money Amazon were making them 10 years ago to do anything about and they’re in exactly the same boat now whining that ‘”We could stop them if we really wanted to but it would mean sacrificing profit for morals” and with that outlook they get no sympathy for me

  15. @Susan Umpleby,
    Stop moaning about ebooks & stick with paper then. Nobody is forcing you to buy ebooks. U can sit home & download a book & save $4 on gas w/ebooks so stop complaining. Btw, keep shooting yourself in the head by peddling your 99 cent self published garbage, girl.

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